Meta-Analysis of Bank Value and Dividend Policy Relation: Connecting Studies on Two Dimensions

Abstract

This research investigates the relationship between value and dividend policy in a bank, based on relevant empirical literature developed during the last twenty years. The approach of meta-analysis employed here allows studies to be grouped and analyzed according to precise research questions and those with similar constructs. The results achieved help to support several theories explaining banking dividend behavior and its relation with value. One important result confirms the ideas of the constructive theorists' school suggesting the positive effect of dividend distribution on bank value, and thus provides momentum for resolving the conflict between two opposite schools in this field of research. Another result provides practical guidance for investors, by implying a significant and negative relation between the bank's market-to-book ratio and dividend paid per share. Finally, the study confirms a significant interrelation between bank value and dividend policy, in particular the strong market effect of cutting dividends for large banks, and reveals the existence of a serious regulatory problem.